WASHINGTON -- In a
full-page statement in this Sunday's New York Times
(January 9, 2005), bipartisan leaders of The Concord Coalition urge Congress and
the President to “confront the hard choices that a meaningful Social Security
reform plan requires” and to “reject both the ‘do nothing' approach and the
‘free lunch' plans that rely on substantial long-term borrowing to appear
painless.”

“The basic case for reform is a matter of arithmetic, not
ideology. Well within the lifetime of America's baby boomers, the current system
faces a growing gap between what it promises in benefits and what we are setting
aside to pay for it. Doing nothing to address this problem will eventually
result in steep tax hikes, deep spending cuts, or massive borrowing from the
public.

“Ensuring a more sustainable system will require change,
meaning that someone is going to have to give up something - either in the form
of higher contributions, lower benefits or a combination of both. No Social
Security reform will succeed unless this fact is acknowledged up front.

“One reform idea that has received much attention lately is
establishing personally owned accounts and ‘funding' them with borrowed money.
Simply funding personal accounts with further borrowing, and not with new
contributions or contemporaneous benefit cuts, raises many concerns:

It would not add to national savings. A
fundamental goal of reform should be to improve national savings. Social
Security reform that relies on deficit financing will not boost net national
savings, and may even result in lower savings if households respond to the new
personal accounts by saving less in other areas. Without additional savings,
any gain for the Social Security system must come at the expense of the rest
of the budget, the economy, and future generations.

It would worsen the already precarious fiscal
outlook. The 10-year cost of roughly $2 trillion would come on top of the
$5 trillion deficit that appears likely if current fiscal policies are
continued. Yet the greater fiscal danger with most such plans is that they
require additional borrowing for decades to come. Official projections already
indicate that current fiscal policies are unsustainable and the new deficits
would only make the problem worse. Savings programmed for the 2050s won't be
enough to prevent us from going over the cliff well before that time.

It would send a dangerous signal to the markets that
we are not taking our fiscal problems seriously. If we ‘pay for' Social
Security reform by running up the debt further, rather than making hard
choices, it would signal to increasingly wary financial markets that
Washington has no intention of doing what is necessary to get its fiscal house
in order. This would increase the risks of a so-called ‘hard landing' such as
a spike in interest rates, rising inflation and a plunging dollar. Promises
that all the new debt will be paid back starting in about 50 years are
unlikely to satisfy the concerns of those who are watching to see what
Washington does now to improve its fiscal position. If markets looked out 50
years, current interest rates would be through the roof.

“Because the trade-offs that genuine reform requires can
appear painful, many leaders try to find excuses for not confronting the hard
choices. Yet the truth is clear. Social Security reform involves real resource
trade-offs. It's time to get serious about reform--and face up to the hard
choices.”